April Stats Suggest The Market May Be Running Out of Steam…
Single Family Prices and Volume
122 single family homes sold in April, up almost 21% from the 101 sold in March, but down by over 12% from the 139 that sold in the same timeframe last year. The average home price increased marginally from March’s average of $551,392 to $553,352 although this is more than 11% higher than last April when the average home price was $497,224. The median sale price also decreased slightly to $532,000 from March’s $537,500, however, this is still an almost 11% increase from last April’s median sale price of $480,000. 226 homes were listed in April representing a 17% increase over March, and a less than 1% increase over the 225 listed in April of 2017. Taken together, there are no major surprises here, however, it appears demand driven upward pressure on pricing has definitely subsided over the past 3 months, as February, March, and April average sale prices came in within a $1,960 range (0.36%), with sales volumes for these 3 months all down year-over-year.
Strength of the Trend
Factors we also look at when analyzing a market to validate its strength are sell/list ratio; sell price; days to sell, and current inventory numbers:
The sell/list ratio increased slightly in April, coming in at 54%, up from 52% in March and down almost 13% from 62% in April of 2017. With the spring market typically bringing strong buyer demand, it is worth noting that taken together, the sell/list ratio for March and April is well below the level in the last couple years, at 77%/62% in March/April 2017, and 90%/79% in March/April 2016. While Realtors continue to lament that there is just not enough inventory, it appears there may be more to the story than that. It is actually more of a case of there is not enough inventory at various price levels to meet the buyer demand at those price levels. Put another way, too many sellers are listing properties with unrealistic price expectations, beyond the prices that buyers are willing to pay. In April there were 226 homes listed in Nanaimo, while the last 30 days has brought 82 price reductions, and this does not include listings that were cancelled and re-entered at lower prices. Translation, the market spoke and (at least) 82 homes were overpriced. At the other end of the spectrum, there are sellers who understand the value of pricing accurately and competitively and are being rewarded with quick sales, in many cases with multiple offers and well above the asking price. The divergence in pricing strategy has never been so evident and with the sell/list ratio hovering just north of 50%, at some point the remaining unrealistic sellers will need to react to a lack of demand at their price levels and adjust their pricing accordingly. Having said that, based on the first 3 days in May, it looks like it may actually be occurring, with 21 properties reducing prices in the first 3 days of the month, a pace that far exceeds the rate we have experienced so far this year.
The average days on the market decreased to 19 days from 20 in March, however, this is 12% higher than the average of 17 days on the market from April of last year. Further to the comments in the paragraph above, this figure only factors in the homes that were priced accurately and competitively and are selling, with many properties continuing to be listed at unsupported price levels in anticipation of further price advances that the market has grown accustomed to over the past 3 years. While it is important for sellers not to leave money on the table, more often than not, the best chance to maximize your return is to price accurately thus maximizing buyer interest when the home initially hits the market. Price too high and you will limit your number of potential buyers, and your chances of a strong initial offer or even a bidding war leading to a sale above the asking price.
As of the end of April, the number of active listings was 308, up over 13% from March, and 11% from inventory levels at the same time last year. While these are not major increases, if this trend continues, it should be a positive for buyers, as more inventory means more choice and hopefully less competition. While a lack of supply has been a key factor in the rapid price increases we have witnessed earlier in this market cycle, with a sell/list ratio just above 50% and inventory levels continuing to rise, it would be reasonable to expect to see more balanced market conditions in the coming months.
Top Performing Neighbourhoods & Categories
14 of the 18 sub-areas defined by the real estate board in Nanaimo saw an increase in the average selling price (trailing 12 months) from March to April, with all 18 experiencing increased prices year-over-year. When looking at these neighbourhood figures, it is important to note that we use trailing 12-month figures to limit volatility caused by lower transaction volumes in some neighbourhoods, where a few high priced or low priced transactions could tremendously skew results. A trailing 12 figure will always be slower to react than simple month-over-month, so that is why the results here are not going to be as pronounced as the figures used in the stats we report above. Moving on, these annual increases range from 6.62% in Cedar to 23.64% in Uplands. Top risers month-over-month were Extension, Brechin Hill, and Departure Bay. Top performers year-over-year were Uplands, Extension, Brechin Hill, South Jinglepot, Lower Lantzville, and Central Nanaimo. Looking at volume, risers both monthly and annually included Chase River, Extension, and Central Nanaimo, historically more affordable areas, no surprise with affordability increasingly being a challenge.
Single-family homes were the only category to see an increase in average sale price from March to April, albeit at less than 1%, although year-over-year they were joined by apartment-style condos and lots. Single-family homes were also the top performing category by volume in April, followed by townhomes and patio homes, while year-over-year, patio homes and apartment-style condos were the top performers.
In April 2018, there were 8 sales above $750,000, significantly less than the 21 that occurred in April of 2017. With rising interest rates, more stringent mortgage qualifications, and the introduction of the foreign buyer tax in Nanaimo, there is simply less demand for homes at higher price points. So what does all this mean for buyers? Well, if you are looking above the $750,000 mark, it is less likely that you will be in competition, and as the days on the market increase, the likelihood of being able to find a motivated seller and be able to negotiate a “decent” deal should be more likely.
On the flip side, if you are looking to unload your home in the $750,000+ range, you will be selling into a much different market than just 1 year ago. It’s not to say that a quick sale will not happen, but it is all the more vital that the home is priced accurately and competitively to maximize exposure when interest is the highest. If you have been trying to time a market top to list (which in our view is nearly impossible and highly risky), there are enough warning signs that we may be there that you may want to take this opportunity to get your home listed, hopefully ahead of a further erosion of demand at higher price levels. Below $600,000 demand remains relatively solid, however, there is no guarantee these conditions will persist, in fact increasingly, the statistics seem to be telling the story of a market cooling.
With that said, investors may want to capitalize on the remaining spring market to take some money off the table in anticipation of cooling market conditions or even a market correction in years to come. Taking the opportunity to lock in your gains and diversify into other asset classes or move into other markets that appear to have more upside potential may not be a bad idea.
We are by no means suggesting that now is the time to sell for everyone, as individual circumstances differ, as do investment objectives, etc. Remember, we all need a place to live and over time real estate generally appreciates. We just know there are peaks and valleys and we have reason to believe we are closer to the peak than the valley.
For a consultation specific to your situation, or if you have any questions about market conditions, please contact us at email@example.com and we would be happy to help.
Check out the Nanaimo Market Statistics Here: Monthly Statistics April 2018